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Egalitarian Mysticism
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14126 |
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Section : |
BOOK WORLD
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1 / 1988 |
2,892 Words |
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Alan Reynolds
Alan Reynolds is director of economic research at the Hudson
Institute, Indianapolis, Indiana. |
THE GREAT DEPRESSION OF 1990
Ravi Batra
New York: Simon & Schuster, 1987
235 pp., $17.95
Ever since the stock market crash of 1929, there have been best-selling books every few years exploiting fears of another crash. Several such books are on the market today, just as there were around 1975 and 1979. Ravi Batra's The Great Depression of 1990 is scarcely unique, but it does make the most extreme claims so far, predicting "the worst economic turmoil in history."
To the average person, stock prices seem to rise and fall for no reason, as though investors--even the skilled staffs of major financial institutions--were simply foolish. The authors of doomsday books can easily exploit the fears that come from such ignorance by arguing that stock prices have to fall simply because they went up. Yet previous peaks in stock market prices, such as December 1961 or January 1966, were usually followed by prosperity, not depression. In 1961, for example, the stock of IBM sold for eighty times its profits per share, while even at the market peak in August 1987, IBM stock was only about twenty times its earnings, and most other stocks were not even that high. Yet 1961 was hardly a year that people remember as an insane speculative binge or a prelude to disaster, even though stock prices in real terms (adjusted for inflation) were even higher in 1961 than they were at the peak of September 3, 1929. Stock prices once again tripled from the summer of 1982 to the fall of 1987, but this was not irrational. Instead, the stock market rally reflected a huge increase in actual and expected profits and
... (1989 of 17134 Characters)
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